The Timken Company (TKR) 8-K Results of Operations and Financial Condition

EXHIBIT 99.1

(Unaudited)
CONDENSED CONSOLIDATED STATEMENT OF INCOME	AS REPORTED						ADJUSTED (1)
(Thousands of U.S. dollars, except share data)	Q1 2007			Q1 2006			Q1 2007			Q1 2006
Net sales	$	1,284,513		$	1,254,308		$	1,284,513		$	1,254,308
Cost of products sold		1,015,177			981,459			1,015,177			981,459
Manufacturing rationalization/reorganization expenses - cost of products sold		11,843			3,036			—			—
Gross Profit	$	257,493		$	269,813		$	269,336		$	272,849
Selling, administrative & general expenses (SG&A)		162,973			170,375			162,973			170,375
Manufacturing rationalization/reorganization expenses — SG&A		1,330			377			—			—
Loss on divestitures		354			—			—			—
Impairment and restructuring		13,776			1,040			—			—
Operating Income	$	79,060		$	98,021		$	106,363		$	102,474
Other (expense)		(3,728	)		(4,851	)		(3,728	)		(4,851	)
Special items — other income		343			(308	)		—			—
Earnings Before Interest and Taxes (EBIT) (2)	$	75,675		$	92,862		$	102,635		$	97,623
Interest expense, net		(7,689	)		(11,602	)		(7,689	)		(11,602	)
Income From Continuing Operations Before Income Taxes	$	67,986		$	81,260		$	94,946		$	86,021
(Benefit) Provision for income taxes		(6,268	)		24,166			32,471			27,851
Income From Continuing Operations	$	74,254		$	57,094		$	62,475		$	58,170
Income from discontinued operations net of income taxes, special items (3)		940			—			—			—
Income from discontinued operations net of income taxes, other (3)		—			8,846			—			8,846
Net Income	$	75,194		$	65,940		$	62,475		$	67,016
Earnings Per Share —Continuing Operations	$	0.79		$	0.61		$	0.66		$	0.63
Earnings Per Share —Discontinued Operations		0.01			0.10			—			0.09
Earnings Per Share	$	0.80		$	0.71		$	0.66		$	0.72
Diluted Earnings Per Share —Continuing Operations	$	0.78		$	0.61		$	0.66		$	0.62
Diluted Earnings Per Share —Discontinued Operations		0.01			0.09			—			0.09
Diluted Earnings Per Share	$	0.79		$	0.70		$	0.66		$	0.71
Average Shares Outstanding		93,963,797			92,942,082			93,963,797			92,942,082
Average Shares Outstanding-assuming dilution		94,811,930			94,010,483			94,811,930			94,010,483

BUSINESS SEGMENTS
(Thousands of U.S. dollars) (Unaudited)	Q1 2007			Q1 2006
Industrial Group
Net sales to external customers	$	544,076		$	503,444
Intersegment sales		366			435
Total net sales	$	544,442		$	503,879
Adjusted earnings before interest and taxes (EBIT) * (2)	$	49,175		$	45,885
Adjusted EBIT Margin (2)		9.0	%		9.1	%
Automotive Group
Net sales to external customers	$	387,960		$	420,984
Adjusted (loss) earnings before interest and taxes (EBIT) * (2)		($7,233	)		($3,141	)
Adjusted EBIT (Loss) Margin (2)		-1.9	%		-0.7	%
Steel Group (3)
Net sales to external customers	$	352,477		$	329,880
Intersegment sales		37,815			45,530
Total net sales	$	390,292		$	375,410
Adjusted earnings before interest and taxes (EBIT) * (2)	$	61,817		$	56,983
Adjusted EBIT Margin (2)		15.8	%		15.2	%

*	Industrial Group, Automotive Group and Steel Group EBIT do not equal Consolidated EBIT due to intersegment adjustments which are eliminated upon consolidation.
(1)	“Adjusted” statements exclude the impact of impairment and restructuring, manufacturing rationalization/reorganization and special charges and credits for all periods shown.
(2)	EBIT is defined as operating income plus other income (expense). EBIT Margin is EBIT as a percentage of net sales. EBIT and EBIT margin on a segment basis exclude certain special items set forth above. EBIT and EBIT Margin are important financial measures used in the management of the business, including decisions concerning the allocation of resources and assessment of performance. Management believes that reporting EBIT and EBIT Margin best reflect the performance of the company’s business segments and EBIT disclosures are responsive to investors.
(3)	Discontinued Operations reflects the December 8, 2006 sale of Timken Latrobe Steel. Steel Group Net sales and Adjusted EBIT have been changed to exclude Timken Latrobe Steel for all periods. Income From Discontinued Operations Net of Income Taxes, Special Items includes the gain on sale. Income From Discontinued Operations Net of Income Taxes, Other includes prior activity of Timken Latrobe Steel in accordance with the sales agreement.

Reconciliation of Total Debt to Net Debt and the Ratio of Net Debt to Capital:
(Thousands of U.S. Dollars) (Unaudited)	Mar 31, 2007			Dec 31, 2006
Short-term debt	$	137,909		$	50,453
Long-term debt		530,590			547,390
Total Debt	$	668,499		$	597,843
Less: Cash and cash equivalents		(100,818	)		(101,072	)
Net Debt	$	567,681		$	496,771
Shareholders’ equity	$	1,562,257		$	1,476,180
Ratio of Total Debt to Capital		30.0	%		28.8	%
Ratio of Net Debt to Capital (Leverage)		26.7	%		25.2	%

This reconciliation is provided as additional relevant information about Timken’s financial position. Capital is defined as total debt plus shareholder’s equity.

Management believes Net Debt is more representative of Timken’s indicative financial position, due to the amount of cash and cash equivalents.

Reconciliation of GAAP net income and EPS — diluted.

This reconciliation is provided as additional relevant information about the company’s performance. Management believes adjusted net income and adjusted earnings per share are more representative of the company’s performance and therefore useful to investors. Management also believes that it is appropriate to compare GAAP net income to adjusted net income in light of special items related to impairment and restructuring and manufacturing rationalization/reorganization costs, Continued Dumping and Subsidy Offset Act (CDSOA) receipts, and gain/loss on the sale of non-strategic assets.

	First Quarter
	2007						2006
(Thousands of U.S. dollars, except share data) (Unaudited)	$			EPS (1)			$			EPS (1)
Net income	$	75,194		$	0.79		$	65,940		$	0.70
Pre-tax special items:
Manufacturing rationalization/reorganization expenses - cost of products sold		11,843			0.12			3,036			0.03
Manufacturing rationalization/reorganization expenses — SG&A		1,330			0.01			377			—
Loss on Divestiture		354			—			—			—
Impairment and restructuring		13,776			0.15			1,040			0.01
Special items — other expense (income):		(343	)		—			308			—
(Benefit) Provision for income taxes (2)		(38,739	)		(0.41	)		(3,685	)		(0.04	)
Income From Discontinued Operations Net of Income Taxes, Special Items (3)		(940	)		(0.01	)		—			—
Income from discontinued operations net of income taxes, other (3)		—			—			—			—
Adjusted net income	$	62,475		$	0.66		$	67,016		$	0.71

(1)	EPS amounts will not sum due to rounding differences.
(2)	Includes the income tax impact of the pretax special items included in this reconciliation and discrete tax items recorded during the quarter.
	The first quarter of 2007 includes a discrete tax benefit of $32.1 million related to the recognition of certain tax benefits in the quarter due to a tax law change affecting a foreign affiliate.
(3)	Discontinued Operations relates to the sale of Latrobe Specialty Steel Unit in November of 2006.

Reconciliation of GAAP income from continuing operations and EPS — diluted.

This reconciliation is provided as additional relevant information about the company’s performance. Management believes adjusted income from continuing operations and adjusted earnings per share are more representative of the company’s performance and therefore useful to investors. Management also believes that it is appropriate to compare GAAP income from continuing operations to adjusted income from continuing operations in light of special items related to impairment and restructuring and manufacturing rationalization/reorganization costs, Continued Dumping and Subsidy Offset Act (CDSOA) receipts, and gain/loss on the sale of non-strategic assets.

	First Quarter
	2007						2006
(Thousands of U.S. dollars, except share data) (Unaudited)	$			EPS (1)			$			EPS (1)
Income from continuing operations	$	74,254		$	0.78		$	57,094		$	0.61
Pre-tax special items:
Manufacturing rationalization/reorganization expenses - cost of products sold		11,843			0.12			3,036			0.03
Manufacturing rationalization/reorganization expenses — SG&A		1,330			0.01			377			—
Loss on Divestiture		354			—			—			—
Impairment and restructuring		13,776			0.15			1,040			0.01
Special items — other expense (income):		(343	)		—			308			—
(Benefit) Provision for income taxes (2)		(38,739	)		(0.41	)		(3,685	)		(0.04	)
Adjusted income from continuing operations	$	62,475		$	0.66		$	58,170		$	0.62

(1)	EPS amounts will not sum due to rounding differences.
(2)	Includes the income tax impact of the pretax special items included in this reconciliation and discrete tax items recorded during the quarter.
	The first quarter of 2007 includes a discrete tax benefit of $32.1 million related to the recognition of certain tax benefits in the quarter due to a tax law change affecting a foreign affiliate.

Reconciliation of Outlook Information.

Expected earnings per diluted share for the 2007 full year and second quarter exclude special items. Examples of such special items include impairment and restructuring, manufacturing rationalization/reorganization expenses, gain/loss on the sale of non-strategic assets and payments under the CDSOA. It is not possible at this time to identify the potential amount or significance of these special items. Management cannot predict whether the company will receive any additional payments under the CDSOA in 2007 and if so, in what amount. If the company does receive any additional CDSOA payments, they will most likely be received in the fourth quarter.

CONDENSED CONSOLIDATED BALANCE SHEET	Mar 31		Dec 31
(Thousands of U.S. dollars) (Unaudited)	2007		2006
ASSETS
Cash & cash equivalents	$	100,818	$	101,072
Accounts receivable		740,837		673,428
Inventories		974,967		952,310
Deferred income taxes		86,113		85,576
Other current assets		94,863		87,894
Total Current Assets	$	1,997,598	$	1,900,280
Property, plant & equipment		1,598,160		1,601,559
Goodwill		204,247		201,899
Other assets		324,058		327,795
Total Assets	$	4,124,063	$	4,031,533
LIABILITIES
Accounts payable & other liabilities	$	528,742	$	506,301
Short-term debt		137,909		50,453
Income taxes		9,167		53,406
Accrued expenses		169,724		225,409
Total Current Liabilities	$	845,542	$	835,569
Long-term debt		530,590		547,390
Accrued pension cost		391,398		410,438
Accrued postretirement benefits cost		683,520		682,934
Other non-current liabilities		110,756		79,022
Total Liabilities	$	2,561,806	$	2,555,353
SHAREHOLDERS’ EQUITY		1,562,257		1,476,180
Total Liabilities and Shareholders’ Equity	$	4,124,063	$	4,031,533

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS	For the three months ended
	Mar 31			Mar 31
(Thousands of U.S. dollars) (Unaudited)	2007			2006
Cash Provided (Used)
OPERATING ACTIVITIES
Net Income	$	75,194		$	65,940
(Earnings) from Discontinued Operations		(940	)		(8,846	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		54,500			49,490
Other		8,202			6,150
Changes in operating assets and liabilities:
Accounts receivable		(64,776	)		(69,452	)
Inventories		(17,791	)		(37,705	)
Other assets		1,943			(187	)
Accounts payable and accrued expenses		(63,764	)		(47,542	)
Foreign currency translation loss (gain)		790			(6,101	)
Net Cash (Used) by Operating Activities — Continuing Operations		($6,642	)		($48,253	)
Net Cash Provided by Operating Activities — Discontinued Operations		940			11,577
Net Cash (Used) by Operating Activities		($5,702	)		($36,676	)
INVESTING ACTIVITIES
Capital expenditures		($60,942	)		($39,354	)
Other		3,124			(1,205	)
Divestments		—			2,393
Acquisitions		(1,523	)		—
Net Cash (Used) by Investing Activities — Continuing Operations		($59,341	)		($38,166	)
Net Cash (Used) by Investing Activities — Discontinued Operations		—			(1,719	)
Net Cash (Used) by Investing Activities		($59,341	)		($39,885	)
FINANCING ACTIVITIES
Cash dividends paid to shareholders		($15,152	)		($14,027	)
Net proceeds from common share activity		11,886			6,132
Net borrowings on credit facilities		66,815			49,176
Net Cash Provided by Financing Activities — Continuing Operations	$	63,549		$	41,281
Net Cash Provided by Financing Activities	$	63,549		$	41,281
Effect of exchange rate changes on cash	$	1,240		$	1,148
(Decrease) in Cash and Cash Equivalents		(254	)		(34,132	)
Cash and Cash Equivalents at Beginning of Period	$	101,072		$	65,417
Cash and Cash Equivalents at End of Period	$	100,818		$	31,285